US pension fund to settle suit for $930m
Friday, 4 July 2008 11:55am
The largest public pension fund in the US fires a warning shot against companies with lousy corporate governance when it demanded a company it invests in to re-write its CG policy and pay a $930 million cheque for wrongful share trading.
The $244 billion California Public Employees' Retirement System (CalPERS) fund yesterday announced a proposed $930 million (US$865 million) settlement of a class-action lawsuit against UnitedHealth, a healthcare services group where CalPERS holds 4.9 million shares worth $132 million.
The settlement is believed to be the largest options backdating recovery in a class action.
The case was brought against UnitedHealth two years ago over its stock-option grant practices. The fund and several other investors sued the company when they discovered UnitedHealth executives profited by backdating stock options.
To make sure the scheme doesn't happen again, the proposed settlement also requires UnitedHealth to make key corporate governance changes, including a process for election of a shareowner-nominated director, enhanced standards for director independence and a mandated holding period for option shares acquired by executives.
Peter Mixon, general counsel of CalPERS said this will protect CalPERS and all shareowners in the future. “The corporate governance reforms achieved in the settlement are a major step forward in our broader effort to ensure that directors are responsible to shareowners," he said.
The settlement is still subject to approval by the CalPERS Board of Administration, the UnitedHealth Group Board of Directors, and the court. The United States District Court for Minnesota will evaluate the proposed terms and determine whether the settlement will be approved.
Ruth Liew
